Stocks and a slew of other “riskon” assets bounced from deeply oversold levels as hope spread that another round of global monetary easing will curb the economic slowdown across the globe. In early May, all the major averages sliced below their respective 50 DMA lines which prompted us to label this market “in a correction.” Then in early June the bulls showed up and defend the 200 DMA lines for the major averages. On Friday, the bulls managed send the benchmark S&P 500 index above the neckline of its bullish inverse head and shoulders pattern (shown above). The next level of resistance is the 50 DMA line and then 2012’s highs.
Monday-Wednesday’s Action- Bad News is “Good” News:
Stocks opened higher but closed lower on Monday as enthusiasm waned regarding Spain’s $125 billion bailout. The best headline I came across was one saying, “Spain Got Tarped.” The details of the plan were not ideal and showed EU leaders just throwing more debt at a debt crisis. After the initial and expected at the open on Monday, stocks fell hard and closed near their lows of the day as investors focused on the upcoming elections in Greece and Italy’s onerous debt burden.
Stocks ended with modest gains on Tuesday but volume, a critical component of institutional activity, was lighter than Monday, as investors looked passed Spain’s woes and focused on hopes that the recent spate of “bad” news will force the Fed’s hand into another round of QE when they meet next week. Cyprus, the third smallest country in the eurozone, sports a tiny population of under 1 million, and its economy only accounts for +0.2% of eurozone GDP asked for a bailout. Yields on Spanish and Italian debt jumped on the news.
The major averages ended lower on Wednesday as sellers showed up and sent stocks lower before the close. The economic data in the U.S. was less than stellar. Retail sales fell -0.2% in May which exceeded the Street’s estimate for a decline of -0.1%. Elsewhere, producer prices missed estimates, falling -1% in May while core prices met estimates, rising +0.2%.
Thursday & Friday’s Action- Fed, ECB, Someone Save Us:
Stocks enjoyed nice gains on Thursday after global Central Banks stepped up and said they are willing to act if the Greek elections spook markets. The Labor Department said weekly jobless claims to rose to 386,000 from 380,000 which topped the Street’s estimate for 375,000. Overall consumer prices slid by -0.3%in May which topped the Street’s estimate for a decline of –0.2%. Core prices rose by +0.2% which topped the Street’s estimate for a gain of +0.1%. The government said, for the first quarter the current deficit data totaled $137.3billion, which is greater than the $130.9 billion deficit that had been anticipated. Again, stocks rallied on hopes that “bad” data will force the Fed’s (and other central bank’s) hand. Stocks rallied on Friday after the latest round of economic data was released. The data suggested that the US economy is “slowing” which investors are hoping will force the Fed’s hand at their next meeting later this month.
Market Outlook- In A Correction
From our point of view, the market is back in a correction now that all the major averages are back below their respective 50 DMA lines. Looking forward, we want to see a powerful accumulation day to confirm the latest rally attempt. Technically, the 200 DMA line and June’s lows are the next level of support while the 50 DMA line is the next level of resistance for the major averages. As always, keep your losses small and never argue with the tape.If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
Special Offer: Do You Know The Cheapest Stocks On Wall Street? Our Members Do. Take Your 1-Month Free Trial Now Stocks Ended Mixed As Earnings And Tariffs Take Center Stage Stocks ended mixed to mostly higher last week as the Russell 2000, Dow Jones Industrial Average and the benchmark S&P 500 ended flat to slightly higher…
Thursday, April 12, 2012 Stock Market Commentary: Stocks and other risk assets continued bouncing back on Thursday helped by fresh hopes of QE3 and a flurry of U.S. economic data. As earnings continue to be released in droves, it is paramount that we not only pay attention to the actual numbers but how the stocks…
Stocks remain strong as investors digested the latest round of weaker than expected economic data. Friday’s jobs report will likely set the stage for the next move in the market. Until then, expect investors to avoid putting on excessive risk as they await the jobs report for a better reading on the economy.
Monday, April 02, 2012 Stock Market Commentary: Stocks and other risk assets enjoyed healthy gains in the first quarter of 2012 as the U.S. economy continues to improve and the EU debt woes have eased materially. For the quarter, the Nasdaq composite surged nearly 19% which was its strongest quarter since 1991! The benchmark S&P…
Tuesday, March 20, 2012 Stock Market Commentary: Finally, stocks and other risk assets fell as fear spread that China’s red-hot economy would begin to slow. As we have been mentioning for weeks, the market is extended to the upside and we would not be surprised to see a nice pullback to shake out the weak/late…
Big Shift On Wall Street; Investors Sell Leaders, Buy Laggards The market is pulling back from over-bought conditions. Something important happened on Friday, when big investors dumped tech stocks (leaders) and bought laggards (small-caps and other under-performing sectors such as biotechs, retail, and financials, just to name a few). In the short term, last month’s…
